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You are here: Home / Archives for Ponzi Scheme

Ponzi Scheme

Crypto Ponzi Scheme: Ohio Man Arrested For $10 Million Worth Of Scam

November 20, 2022 by Mishal Ali

An Ohio man was arrested for allegedly running a Crypto Ponzi scheme, from which he raised at least $10 million from investors, according to a press release by the Department of Justice published on November 18th.

As the allegations state, Rathnakishore Giri has been accused of deceiving investors by lying to them about his experience in trading Bitcoin derivatives. As asserted by the indictment, he falsely promised them profitable returns without putting their principal investment at risk.

In fact, Giri is alleged to have used money from new investors to repay old ones, which is typical of a Ponzi scheme. He also misled his investors by making them believe that there were delays when they wanted to cash out or receive their promised principal.

According to the press release:

Giri is charged by indictment with five counts of wire fraud. If convicted, he faces a maximum penalty of 20 years in prison on each count. A federal district court judge will determine any sentence after considering the U.S. Sentencing Guidelines and other statutory factors.

Crypto Crime Trends For 2022

A blockchain analysis firm, Chainalysis, previously reported that the amount of cryptocurrency-related crimes reached a new all-time high in 2021, with illegal addresses collecting $14 billion during the year.

The utilization of cryptocurrencies is increasing more quickly than before. In 2021, the total amount of transactions across all cryptocurrencies recorded by Chainalysis increased to $15.8 trillion, an increase of 567% over the total in 2020.

Screenshot 20221120 121122
Source: Chainalysis

The biggest surprise of all, though, could be that the growth in illegal transaction volume was only by 79%, or by a factor of almost an order of magnitude less than total adoption. 

In addition, the value of crypto stolen from victims increased by 82% in 2021 to $7.8 billion. More than $2.8 billion, or almost as much as the rise over 2020’s total, came from rug pulls.

Moreover, by transaction volume, scams continued to be the most common cryptocurrency-based crime, stealing over $7.7 billion in cryptocurrency from victims all around the world.

That is an increase of 81% from 2020, a year in which scam activity dramatically decreased compared to 2019, mainly due to the lack of big Ponzi schemes. That changed in 2021 when Finiko, an Eastern European Ponzi scam primarily preyed on Russian-speaking individuals, collected more than $1.1 billion from its victims.

Screenshot 2022 11 20 001454
Source: Chainalysis

Related Reading | Crypto Miners In Russia To Get The Green Light To Sell On Global Markets

Filed Under: Crypto Scam Tagged With: crypto scams, DoJ, Ponzi Scheme

Over an Alleged $1M NFT Scheme, the Department of Justice Sued Two 20-Year-Olds

March 26, 2022 by Goku

For their roles in a $1.1 million NFT scam, the Department of Justice charged two 20-year-olds with fraud and money laundering. It is one of the first steps taken by federal authorities to rein in the burgeoning asset class.

The project was dubbed “Frosties” by Ethan Nguyen and Andrew Llacuna, both of Los Angeles, and promised investors future giveaways, more tokens, and a metaverse game based on the brand.

Prosecutors claim the duo engaged in a “rug pull” in January, in which they advertised Frosties on social media and then vanished with the money they earned.

“Wherever there’s money to be earned, fraudsters will find a way to get it,” said Damian Williams, a US attorney in New York.

Frosties- the cute NFT scam

Ethan Nguyen and Andre Llacuna are accused of making $1.1 million selling non-fungible tokens (or NFTs) based on the cartoon character “Frosties.”

They shut down the initiative and shifted its cash to a variety of different crypto wallets after selling the NFTs, leaving Frosties owners without the promised benefits.

The Internal Revenue Service, Criminal Investigation (IRS-CI), and Homeland Security Investigations (HSI), according to the criminal complaint, began investigating Frosties in January, immediately after receiving complaints about the fraud.

Frosties was a popular initiative, with 8,888 NFTs (equal to $130 in Ethereum) selling out within an hour of its public introduction.

It was quickly abandoned by the creators. When buyers sought to resell their NFTs, they only received a few bucks, and they gave up all prospects of seeing future promised benefits, such as 3D copies of their avatars and a Frosties video game.

(However, some con artists in the community sought to resuscitate the Frosties as a different NFT lineup.) Frosties’ two perpetrators have since been apprehended in Los Angeles, California.

“Hello, Garry. This project is coming to a close, which I realize is startling. I had no intention of continuing the project, and I have no plans for the future. As a result, the project is drawing to a close. You were a fantastic moderator with a big heart” – An alleged message from Ethan Nguyen to a Frosties community moderator.

Filed Under: Crypto Scam, News Tagged With: department of justice, NFT, Ponzi Scheme

BitConnect founder accused of Ponzi scheme has vanished

March 2, 2022 by Aishwarya shashikumar

Satish Kumbhani, the founder of BitConnect, has gone missing a week after being charged in a $2.4 billion Ponzi scheme that allegedly deceived investors in the United States.

The US Department of Justice (DoJ) indicted Kumbhani, an Indian citizen, with criminal charges last week. In September 2021, the Securities and Exchange Commission (SEC) filed a separate lawsuit against Kumbhani, alleging that he fraudulently obtained more than $2 billion for BitConnect. The issue currently is that Kumbhani is no where to be found.

SEC

Officials stated in a legal filing on Monday that Kumbhani has most likely left India and that his whereabouts are uncertain. This comes after the SEC learned in October 2021 that Kumbhani had likely moved from India to an unfamiliar address in another country.

Extension plea in BitConnect’s founder missing case

Richard G. Primoff, senior trial counsel in the filing has requested an extension until May 30 from U.S. District Judge John Koeltl.

Primoff also stated that the Commission has been in contact with the country’s banking regulatory agencies since November in an effort to track out Kumbhani’s address. At this time, however, Kumbhani’s whereabouts are unclear, and the Commission is unable to say when, if ever, its attempts to identify him will be successful. He further stated,

“The Commission did not know the whereabouts of Kumbhani, an Indian citizen, at the time it filed this action, and BitConnect is an unincorporated entity the Commission must serve through its manager, Kumbhani.”

BitConnect, which was founded in 2016, was one of the biggest and most popular projects in the mid-2017 initial coin offering (ICO) craze, raising billions of dollars from international investors for a protocol that allegedly paid out 10% in interest earnings via its BCC token to investors, with users who “referred” other investors receiving even more benefits.

However, platform administrators closed BitConnect’s earning platform on January 16, 2018, when the company’s product came under growing scrutiny from legislators and investors. In the days following the platform’s collapse, BCC prices plunged to below $1 from a prior peak of about $500.

Such circumstances sparked a legal struggle in the United States to bring BitConnect’s founders to justice, with Kumbhani and American citizen Glenn Arcaro at the heart of the plan. On 1 September 2021, Arcaro pleaded guilty to criminal counts, comprising conspiracy to commit wire fraud and criminal forfeiture.

Filed Under: News, Crypto Scam, World Tagged With: Bitconnect, Cryptocurrency, DoJ, Ponzi Scheme, SEC

Bitcoin Compared To ‘Ponzi’ By Black Swan Author

April 24, 2021 by Sahana Kiran

The world’s first and largest cryptocurrency, Bitcoin [BTC] has garnered several fans across many industries from all around the world. Just as the price of the king coin shot up, the craze with regard to it also witnessed a massive surge. BTC hasn’t lost a lot of fans, however, prominent author, Nassim Taleb went on to recently announce that he no more supported the king coin.

Appearing in a recent interview with CNBC’s Squawk Box, the Black Swan author revealed the reason behind his sudden aversion towards BTC.

Bitcoin Has No Connection With Inflation, Taleb Asserts

Taleb made rounds in the crypto community after he suggested that the world’s largest cryptocurrency could have been an insurance policy. However, during February 2021 Taleb decided to dump all of his BTC, citing volatility as a major reason.

More recently, in the Squawk Box interview, Taleb pointed out that the king coin entailed the “characteristics of an open Ponzi”. While several have time and again suggested that Bitcoin, similar to gold has been a hedge against inflation, the Black Swan author suggested otherwise. He believed that there was no “connection between inflation and Bitcoin.”

Elaborating on the same, he added,

“If you want a hedge against inflation, buy a piece of land, grow—I don’t know—olives on it. You’ll have olive oil if the price collapses. With Bitcoin, there’s no connection.”

Bitcoin [BTC], over the last couple of days, witnessed a massive downfall. The king coin plummeted from a high of $64K all the way down to $48K. During press time, BTC was trading for $49,704. The king coin once again proved to be extremely volatile.

Furthermore, Taleb asserted,

“These gimmicks, of course, you have Bitcoin today, you may have another one tomorrow they come and go, and there’s no systematic link between them and the claims they make.”

Filed Under: News, Bitcoin News Tagged With: Bitcoin (BTC), Ponzi Scheme

DoJ Arrested Five People for Allegedly Running a $20 Million Crypto Mining Scam

August 19, 2020 by Yvette Mwendwa

According to a statement by the United States Department of Justice (DoJ) on August 18, five individuals were detained in connection with a crypto mining scam that ended up defrauding investors to the tune of $20 million.

The suspects allegedly urged investors to invest in their cryptocurrency trading and mining firm, AirBit Club, which in reality does not exist. According to the report, the suspects include Gutemberg Dos Santos, Jackie Aguilar, Pablo Renato Rodriguez, Cecilia Millan and Scott Hughes. They allegedly lured unsuspecting victims to invest in their crypto mining scam, promising a massive return on capital.

Crypto mining scam lands five in hot soup

Notably, Renato Rodriguez and Gutemberg Dos Santos founded the AirBit Club back in 2015. Both of them recruited both Cecilia Millan and Jackie Aguilar as marketers. The suspects falsely claimed that the company’s income generation is derived from its cryptocurrency mining and trading activities.

As per the report, investors were required to purchase a membership plan for the various programs of the Ponzi scheme to start earning passive income. At the end of the day, however, the firm failed to keep its promise to investors. Suspects have used the proceeds of the crypto mining scam for personal gain, the acquisition of luxurious properties such as apartments, sports cars, and jewelry,

“As alleged, the defendants put a modern-day spin on an age-old investment scam, promising extraordinary rates of guaranteed return on phantom investments in cryptocurrencies. Thanks to HSI, the defendants are in custody and facing serious criminal charges,” stated Acting U.S. Attorney Audrey Strauss.

Suspects to face charges against conspiracy to commit fraud

Moving forward, the DoJ report notes that three of the suspects, Dos Santos, Rodriguez, and Millan are up against one charge against conspiracy to commit banking fraud, conspiring to commit money laundering, and conspiracy to commit wire fraud. On the other hand, Aguilar is being charged with a single conspiracy to commit wire fraud while Hughes is facing charges against one count of conspiracy to commit money laundering and one count of conspiracy to commit banking fraud.

Filed Under: Industry, News Tagged With: crypto fraud, Crypto mining scam, crypto scams, cryptocurrency scam news, DoJ, Ponzi Scheme

Dutch blockchain gaming company CEO on the run as fraudulent activities come to light

November 14, 2019 by Akash Anand

New companies are being built on the blockchain daily, and one of the most significant contributors to that are gaming firms. In between the cutthroat crypto world, some companies have taken steps to gain unfair advantages, which have now been called out. One example of such a company is Komodore64, a Dutch blockchain organization that has filed for bankruptcy after the founder defrauded its investors.

The founder has been on the run after raising millions of dollars in investment rounds but failing to pay employee salaries or even deliver a product. As per the Dutch Newspaper, The Sprout, the company wanted to use blockchain technology to keep track of transactions that occur within the game.

The idea generated so much buzz that it received funds from multiple quarters with an Italian investor, even transferring 600,000 to the company.

Sam Narain, the alleged perpetrator, took drastic steps as the CEO to ensure that the company received investments no matter what. The information has come to light that he had even asked some of his people to pose as Goldman Sachs employees to fool investors into thinking he had a deal with them.

The company allegedly tanked all its savings by thrown extravagant parties and events with one launch party at the Fokker Terminal in Hague amounted to thousands of euros.

What made matters worse is that the company had not paid the supplier at that event either, bringing up the fraudulent nature of the case. It has not been fully confirmed as of yet, but the latest reports now show that the founder has been arrested in The Hague. The local newspaper also informed:

“Whether the arrest actually took place at that hotel is not yet clear. In the meantime it has been established that the entrepreneur was recently arrested and will be questioned on Tuesday, the curator of Komodore64 John Dullaart confirms to Sprout. According to him, it is not yet 100 percent certain that the arrest has to do with the bankruptcy of Komodore64, but it obviously has the appearance of that.”

The development still has its tendrils spread out as there is also speculation that the real co-founder was Max Theyse, who was not able to fulfill the role that was then taken up Narain. Police are still looking into more evidence to pin down Narain as the actual culprit and to ensure the disgruntled employees are helped out.

Disclaimer: The presented information is subjected to market conditions and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

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Filed Under: News Tagged With: Blockchain Games, Ponzi Scheme

Top Singapore authority issues warning on Bitcoin investment fraud website

July 31, 2019 by Tabassum Naiz

As Singapore is becoming the major hub for crypto, it’s gaining increasing attention from across the worldwide people. But the case isn’t as cool as it appears, scammers are using the names of authorities to solicit Bitcoin investment from the general public.

MAS Warning on Fraud website Soliciting Bitcoin Investment

The latest press by Singaporean financial watchdog, the MAS (Monetary Authority of Singapore) claims that a website “Bitcoin Loophole” uses fake comments supposedly made by Goh Chok Tong, former Singapore’s Prime Minister. By adding such comments, the site is soliciting bitcoin investment. More specifically, it asks the community to make a deposit of USD 250, which would then be traded on its platform.

As soon as MAS was informed about this act, MAS issues warning letter, asking the public to avoid such comments and fake websites. The quote provided on its site is either simply fake or used from earlier reports to convince investors. MAS said in a report;

“The site asks readers to make a minimum initial deposit of $250 into a purported trading platform, Bitcoin Loophole, which would automatically initiate trades on one’s behalf,”

Besides asking for the deposit from investors, scammers also attempted to receive sensitive information of users – including credit card details and bank information. This appears to have a fake scheme to persuade investors, which MAS warned public ‘to be extremely careful’ while dealing with schemes that promise higher ROI or represent the name of authorities.

This isn’t the first time, MAS cautioning public, earlier it had issued several warnings on similar topics and asked to practice due diligence before putting their money into such schemes.

“In the past year, there have been websites fraudulently using the names and photographs of Ministers and other prominent public personalities to solicit Bitcoin investments,” the MAS concluded.

Bitcoin’s rising growth and awareness has become an essential topic of attention in terms of investment, profit, and involvement in global innovation. As Singapore is becoming the hub for crypto and blockchain companies, bad players are at their best to leverage the benefits from the rising crypto prices and increasing interest from the public. The release further explains that;

Members of the public are advised to exercise extreme caution and avoid providing any financial or personal information on the forms linked from the website. Anyone who suspects that an investment could be fraudulent or misused for other unlawful activities should report such cases to the Police.

Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

Never miss our daily cryptocurrency news, price analysis, tips, and stories. Join us on Telegram | Twitter or subscribe to our weekly Newsletter.

Filed Under: News Tagged With: Bitcoin (BTC), Ponzi Scheme

Crypto scammers pretend as FCA in Emails to capture investors attention

July 23, 2019 by Tabassum Naiz

The latest report states that crypto scammers are misleading investors by sending emails, impersonating UK’s FCA (Financial Conduct Authority). These emails are intending to amass investor’s interest by promising “guaranteed chance to earn” on crypto-related investment.

Scammers Guaranteeing Huge Earning Using FCA’s name

As scammers are quite smarter, these impersonated emails were featuring the FCA’s branding and Prudential Regulation Authority’s logo with a subject line, entitling “Guaranteed chance to earn.”

The emails quickly want investors to believe in the brighter future of Bitcoin in terms of value and specifically mentioned the price could hit over $20k by 2020. With that, recipients were encouraged to click on a “Click here” button.

“Bitcoin is still a long way off its peak price of $20,000, which it reached in 2017, but some cryptocurrency experts believe it could hit an even higher value by 2020.”

While FCA had confirmed their specific team is scrutinizing the matter, they have advised having due diligence ahead of clicking such buttons or act upon such emails. FCA always quickly cautioned investors on such matters and this time too, it warned that;

“The correspondence is likely to be linked to organized fraud and we strongly advise you not to respond to the criminals in any way,”

Nevertheless, this caught the attention of few more users when Dominic Thomas, founder of Solomon’s Independent Financial Advisers, took to Twitter and opened up about such scam emails. He said that he received the email five times over the weekend and stated that

“Email reveals the extent of the problem with cheap and easy new media ‘advertising'”.

Dear @TheFCA here is an email I have now had 5 times since Friday. Your name is now being used for a virus of some sort I assume… pic.twitter.com/w0ULRAT434

— Dominic Thomas 💙 (@solomonsifa) July 22, 2019

Following other such queries on scam email, FCA ensured that they would never contact members of the public for money or any other bank details. It further warned recipients and the general public that this might be associated with the fraud and requested not to respond to the criminals in any way. It read that;

“Look for signs that the email, letter or phone call may not be from us, such as it listing a mobile or overseas contact phone number, an email address from a Hotmail or Gmail account, or a foreign PO Box number. “Scam emails or letters often contain spelling mistakes and poor grammar.”, It continued.

Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

Never miss our daily cryptocurrency news, price analysis, tips, and stories. Join us on Telegram | Twitter or subscribe to our weekly Newsletter.

Filed Under: Crypto Scam, Industry Tagged With: Crypto Regulations, Ponzi Scheme

Money from the sky: 25-year-old Crypto promoter sentenced jail

July 23, 2019 by Tabassum Naiz

Isn’t it exciting when we hear/read someone is throwing money from the sky? But a 25-year-old boy given suspended jail sentence due to his public stunt of throwing HK $100 bills from the roof of a building in Hong Kong’s most impoverished district.

Crypto-Promoter Given Suspended Jail Sentence

Wong Ching-Kit is also known as “Coin Young Master” – he did this public stunt back in December 2018, but the latest news states that Won Ching-Kit has suspended for two years for committing a nuisance in a public place.

However, this stunt was an act to promote one of his crypto businesses – in fact, reports state that the boy has been accused of fraud by few enthusiasts who states that, he sold so-called “special crypt mining machines” which in reality are just worthless.

This report was shared by famous media South China Morning Post (SCMP) on July 19, citing;

Wong Ching-kit, 25, better known as “Coin Young Master”, admitted to assisting his company’s promotion of a new cryptocurrency in Sham Shui Po on a busy Saturday afternoon last December, and pleaded guilty to one count of nuisances committed in a public place.

According to the videos that surfaced on social media earlier, it was revealed that crowds on the street immediately flocked to gather the notes/HK bills and while others gathered to capture the moment of “rain money.”

Nevertheless, as per the reports, it was at-least HK$6000 that seen raining from the top of a building in Kowloon district. During that time, there were two videos found on wong’s social media, one showing “money from the sky,” and another video where Wong appeared and asked people to support his business but quietly denied he was anywhere involved in the “rain-money” incident. Moreover, the video caption had also claimed that;

“In the future, there will be money falling from the skies across different parts of Hong Kong.”

Although Wong’s lawyer requested fines rather than a jail sentence, but according to the Magistrate Leung Siu-Ling, penalties are unsuitable; she said;

His promotional stunt was not ideal as the situation could easily have turned ugly when there were up to 300 people on site.

Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

Never miss our daily cryptocurrency news, price analysis, tips, and stories. Join us on Telegram | Twitter or subscribe to our weekly Newsletter.

Filed Under: Crypto Scam, News Tagged With: Crypto, Ponzi Scheme

Tron ponzi schemes: Burn your Tronix (TRX) away the hard way

April 8, 2019 by Ali Qamar

The peril

So you want to find a way to make a lot of money quickly and safely. Don’t we all? That’s one of the very reasons why some people become interested in crypto in the first place. There’s nothing wrong with that. It’s not even rare.

But if you read any book at all dealing with any kind of investments (the traditional stock market, commodities, forex, and yes, cryptocurrencies) the first piece of information that the author will try very hard to convey to you in the most precise way is this: becoming a trader or an investor is risky.

So the first thing you need to do whenever you get involved in any of those activities is to asses the risk they imply, and figure out how if it’s a good fit for your appetite for risk.

Risk appetite sounds like a very intuitive notion, but it’s actually defined in an HM Treasury paper as the amount of risk that an organization or individual are ready to accept, tolerate or be exposed at any moment. That definition expands in that paper by defining five types of risk appetite.

  • Averse: stays away from risk in all circumstances.
  • Minimalist: plays it safe but accepts a little inherent risk when there’s potential for a limited reward.
  • Cautious: also prefers to play it safe but it’s ready to accept residual risks that may have the potential for a limited reward only.
  • Open: it takes into account every option available and opts for the one with the highest probability to succeed with acceptable reward levels.
  • Hungry: wants to find options of high risk and great reward.

The thing to understand here is that none of those five preferences for risk is right. None is wrong either. Each of those approaches to risk management can be efficient depending on many factors that include the amount invested, the asset you’ve chosen to invest, potential market size, volatility, liquidity, politics, etc.

What we all would like would be a high level of return without any risk at all. And it will never happen. A risk is at the heart of any investment. As a matter of fact, risk and reward levels are very often directly proportional. The safer you are, the fewer you earn. And some risks are not inherent to the asset itself or to the market. There’s the risk of technical failure (your internet goes off just at the moment you were going to place that order and the perfect moment to make a profit, and the moment is lost), the risk of fraud, and things of the sort.

Meet Mr. Chrles Ponzi

Several smart contracts, created by anonymous users, have been popping up around the Tron network over the last few months. They offer high profits with no risk at all. The most popular one promises you 3.33% of daily growth for the amount you invested. And that will keep going on indefinitely (in principle, it could last forever). So, it just goes up all the time. Forever. Whatever the TRX or BTC price is. At that rate, you recover your initial investment in a month flat, and from then on, it’s all profit until Kingdom Come.

Does it sound kosher to you? Maybe you’d instead think that it just seems too good to be true. And you’d be right because that’s the case. This kind of “project” has been known as a “Ponzi Scheme” for more than a century because it was made famous by the notorious criminal Charles Ponzi.

He cheated investors out of his money using the trick that now bears his name. He would promise his victims a 50% return in a month and a half. 100% in three months. As he made people excited and the money came in, he used fresh money from new “investors” to pay the earlier victims off. He kept going on until August 1920. By then he caught The Boston Post’s eye, so the news organization thought it would be interesting to dig a little and do a little research about Mr. Ponzi’s returns. The inquiry stirred the investors and scared them off the scheme. They pulled their money out, and Mr. Ponzi spent 14 years in prison.

As explained previously, a Ponzi scheme promoter pays his first investors back by raising money from new investors. But the potential investor pool is not infinite, to say the least, so sooner or later he will run out of fresh money coming in. At this point, the scheme collapses.

Ponzi schemes are not all that rare, and they keep happening everywhere in the world. And gullible people keep falling for them. And now, this kind of scheme has found its way into the crypto verse in general and, more specifically, into the Tron Main Net. Several smart contracts are programmed to behave in this exact way. How can you tell? Look for the following signs:

  • The promise of high investment returns at a very small or nonexistent risk. This is the third time we mention this and, chances are it won’t be the last because it’s just so important. Risk begets profit, and there’s just no way around that. It’s almost a physical law (actually, it’s not very different from the Second Law of Thermodynamics). Even if you choose the safest possible asset in the world, you will still have to deal with bad days in which things go South. If you really want to have no risk at all (which is understandable), then you will need the resignation of keeping your level of wealth precisely as it is.
  • Excessively uniform returns. Markets are never flat. This is true of every financial market known to man, and the cryptocurrency ecosystem is no different. Things are never dull, things are never consistent permanently. On the contrary, everything is changing all the time which is why it takes skill and knowledge to make a buck. Anything that promises you a permanent 3.33% return every day without exception is just deceptive because it’s unnatural as markets go.
  • Anonymous team. Most clean projects in the world have a team behind it which is not shy about letting you know who they are. That’s because successful legitimate projects help build a team’s reputation so that they can keep developing new projects and getting support from investors and the community. But being vocal about who they are also means that they can be held accountable for any misbehavior. Since the internet and the cryptosphere allow for various degrees of anonymity, it’s no surprise at all that fraudulent operations are run by invisible individuals or teams. Distrust anonymity thoroughly when it comes to giving your money for somebody. Especially in the Tron network.
  • Convoluted or secret investment strategies: never invest in something you don’t understand or somewhere in which the investing process is just a black box in which you can’t look under the hood at all. It’s your money. You have every right (and need) to get every bit of relevant information about how your money will be used. This is particularly important because the Ponzi scheme promoters in the Tron network are merely getting started. More elaborate schemes will appear in the future, and it behooves you to be able to tell them apart from the rest. Those who run these schemes say, of course, it’s no scam at all. But the facts are quite simple when it comes to this. If that’s the only argument they can offer, and if they can only pay back old customers with the money they get from the new ones, then it’s a Ponzi scheme however you want to look at it.
  • Getting payment not straightforward and encouragement to roll over: if getting paid is not quick and painless, be suspicious. Casinos and gambling sites love to get your money, but when you ask for a withdrawal (assuming you’re so good at betting that you actually can win consistently, which is no mean feat), they are quick to pay. Keep also in mind that Ponzi scheme administrators will encourage you very strongly to “roll over” your funds. That way, they don’t need to pay you.
  • But we are in a blockchain network. And blockchains are a technology designed specifically to bridge trust gaps. In any other environment, getting some kinds of information is just impossible unless you’re willing to break the law (which we do not recommend). But in a blockchain such as Tron’s (and this applies even to Bitcoin’s blockchain as well) the transaction information that the network carries out is transparent. So all it takes is a bit of basic research for you to get all the information you need to know if a given smart contract is real or a scam.

Ponzi-like smart contracts: The next generation in financial fraud

P3T Daily Roi seemingly qualifies as the oldest Ponzi scheme running on Tron. It’s a smart contract that allows users to deposit and withdraw TRX each minute. If you leave your tokens there for a full day, you get a 3.33% return on your tokens daily.

We have more to say on this but, before we move on, let’s just do the Math on this. How much is 3.33% really? How much will it yield in a year for you? Well, fortunately, it’s a straightforward calculation to perform. It’s merely 1.0333 to the power of 365. That’s 155828.44.

That means that, if this were true, you’d get 155828.44 for every TRX token you invest, if you just leave it there for a full year. This kind of earnings is unheard of in the real world. Even when stocks such as Yahoo, just to mention one, soared to the stratosphere, they didn’t pay that much back. Maybe even drug dealing can’t get you that kind of returns.

It started slowly as only a few people tried it out. But then, after a little marketing and time, it took off, and people came to the site in high volumes. Put a lot of tokens into it. At its peak, it had around 37 million Tronix coins (which is not very far from a million bucks). This happened a couple of weeks ago only. And then, the P3T encouraged the participants to leave their tokens in the system so they could take advantage of compound interest. What a surprise, huh? Well, most of them did roll over.

By then, those who got in early had “earned” a reward level (compound interest is real, and it grows fast) number of tokens that was more than enough to bring the whole scheme down, should those early adopters chose to withdraw their funds. And they did. To a degree, they started to cash their coins out, and the whole P3T community got panicked. A chain reaction started. People were not so willing to roll over anymore and wanted to get their rewards there and then.

As all that happened, the contract’s value went way down which caused new investors to stay away. In only a week, the “project” had lost more than half of its value (to about 15 million TRX). It’s wholly consumed now. The P3T team tried to get new investors like if their lives depended on it so they could pay back to all the users that were leaving. But the writing was on the wall, and the P3T ship was sinking. It was beyond salvation, and even a vast TRX injection could not prevent the contract to become nill in a few weeks at the most.

But P3T wasn’t unique at all. Other similar smart contracts have popped up around Tron. They wear the camouflage of an honorable project. The improve on durations, sustainability and reward circles. So the makeup is effective in making an ugly thing look pretty, and it makes it harder to tell a fraud when you see it. They do look more respectable, but they’re still Ponzi schemes, make no mistake about it.

Investments vs. Financial Fraud

So what’s the difference between sheer Fraud and a real project? For a start, Ponzi schemes can’t last very long. The pool’s alleged value grows too quickly to be sustained by new investors alone, and because the scheme creates no legitimate revenue at all, it just can’t keep going.

There’s no service or product associated with Ponzi schemes, so these are projects that have no way at all to make money. There’s no innovation, no production, no value is added into anything at all. Only the creating team and the early participants get something out of it.

And that’s different from authentic projects precisely because real projects are designed to behave oppositely. They will use a resource to create something. To come up with a solution to a problem that people actually need to solve.

If it solves said problem conveniently, it will grow naturally and create a sustainable income. Those projects could remain around for years and even thrive, even if they have to deal with losses every now and then. They stay around because they have the fundamentals needed to continue to create revenue.

Financial fraud is a thing!

So you need to know which other smart contracts look like Ponzi schemes? Well, let’s see… 4Days Profit, 12 ROI, FOMO 7, Rising ROI, Rocket Roi Dynamic, Turbo Dynamic ROI, Rocket ROI, 100roi, Turbo ROI, Tron Vault, or TronBank.

Those are the more obvious ones, but there could be more, and the future will bring us lots more of them for sure. Don’t take our word for it, we’re not accusing anybody. Just visit those websites and see what they offer compared with the red flags we gave you earlier in this article so you can make a decision on your own.

But they do meet with all the criteria as far as we can tell. They seem to be acting as Ponzi schemes, and each does it in its very own way. Some will keep 15% of your initial deposit as a fee. Others will promise you a return in a few days, even a few hours. But each and every one of those contracts will end up out of cash, and they will crash down just as P3T did. It’s just a matter of time.

P3T ignited greed in Tron. It began a trend of get-rich-quick mania. It’s seeming success inspired all the other equally fraudulent sites by promising users to make them rich without any risk or effort.

As P3T’s ending begun, there were users depositing hundreds of thousands of TRX tokens in the hopes of profiting. Now that the contract is empty, chances are that many among them lost most of the assets they invested in it.

So what will happen in the future?

We’ve been through the shrimp farm mania, gambling mania, and daily ROI mania. Actually, we’re still stuck on ROI mania. We can and should expect other scam bubbles to appear in the network in the future. This isn’t cynicism or pessimism, but if we’re not aware of them, then we can’t protect ourselves from them.

Maybe the next scheme to become a thing in Tron (and other blockchains) will be the pyramid scheme. It’s been quite successful in the real world for years, and it’s even gained a degree of respectability for something that’s inherently fraudulent.

The pyramid scheme is not a Ponzi scheme, but there are similarities. The pyramid is based on networking and network marketing. The “official” idea is that the profits in sales are shared among all the person in a given thread within the pyramid, all the way to the top.

Much as Ponzi scheme, these models also fail because there’s just not enough people to support the absurd amount of rewards promised by the model. There is such a contract in Tron already. And others will appear as that one becomes successful, at least for a short while.

The Crux

So hereś the beef. You should never get involved in any smart contract that:

  • Guarantees profits while promising high returns.
  • Claims it can’t fail (that there’s no risk).
  • Insists in you rolling over and no cashing out or makes it difficult for you to collect your earnings.
  • Says it has a sophisticated and complicated system to create revenue that we mortals couldn’t possibly understand because we’re not financial gods as the anonymous team behind this project is.
  • Offers no service, sells no product, solves no problem but greed.
  • As things stand right now, Tron community members seem to prefer gambling and get-rich-easy schemes. So it’s fertile ground for con artists. This is terrible news for the individuals that have lost money in the past because of this, and for those who will lose it in the future. But it’s terrible news for Tron and the world’s blockchain community as a whole as well because it discredits a powerful and innovative technology that can be used for good.

This will only change if we the users educate each other, denounce frauds as frauds, and focus on real projects that have real fundamental value. Yeah, that’s much harder. It takes expertise, time, energy and hard work. But that’s great for everybody.

Image courtesy of Pixabay.

Disclaimer: The presented information is subjected to market condition and may include the very own opinion of the author. Please do your ‘very own’ market research before making any investment in cryptocurrencies. Neither the writer nor the publication (TronWeekly.com) holds any responsibility for your financial loss.

Filed Under: Education, Crypto Scam Tagged With: Ponzi Scheme, TRON (TRX)

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