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The term “ponzi scheme” reminds me of pond scum. It may look like a pretty green shade of feed, but in reality it is toxic and sucks the life out of the fish trying to swim in the pond. How long are we going to let the pond scum of the HYIP/Surf world suck the life out of those of us trying to swim?
I know that I’m going to get flamed for this article with people wanting to know why I’m trying to bite the hand that feeds us. After all 99% of all HYIPs/Surfs are ponzi schemes. Well, I am not the only one sick and tired of these scammers and it’s time to take a stand against them. They are illegal, because they are toxic to our funds. If we aerate the HYI pond with knowledge and understanding, we can kill off a great number of these pond scum.
So, just what is a Ponzi Scheme?
The term ponzi scheme originates from a man named Charles Ponzi. Wikipedia has a nice explanation of the original scam here. Basically, the scheme consists of using new deposits to pay out old deposits that have matured into payments due. It doesn’t matter if the scheme is less than 100% of a ponzi. If ANY of the new deposits are used to pay off old ones, it is a ponzi scheme. It also doesn’t matter if there is a service, like advertising, in between. Ponzi schemes sometimes say that they include paid advertising, fees, etc. in with the payments. They are still a ponzi.
Even if an administrator has “honest” intentions for running a ponzi, they are still scammers. An “honest” ponzi scheme is an oxymoron. Eventually, the withdrawals match or grow greater than the deposits. Programs fold as they reach this peak or slide down the other side. Some blame it on the members and/or bloggers. Some blame it on administration. Think about it… ponzi schemes are set up to fail by definition. Folding with a large majority of losers is inevitable. EVERY ponzi scheme is a scam, no matter if they are currently paying or not.
In order for a program to not be a ponzi, they must use the deposits to earn outside of the program. It is fine if they use some of the deposits as a reserve fund. The ROI should reflect the actual earnings. No, I don’t mean the exact earnings. Program administration/staff need to make a profit from the program, too. They take a percentage of the earnings and/or fees. Their earning needs to be greater than their administrative and advertising costs. In other words, normal business practices. There is no reason why the administrator/staff (and members) of a real opportunity shouldn’t make it rich, if they are good at obtaining gains and running a program.
How do I spot a Ponzi Scheme?
Spotting a ponzi is not as easy as it sounds. There is a wide variety of criteria and even then, it is difficult to determine. Some ponzi owners are very slick con-men, like Bobby Krimm, and can fool most people. The administrators prey on those wanting to believe that their program is the real thing and “the next big one!” The really good ones are fluent in the current pulse of the HYI industry. People spout off in blogs/forums that they hate this or that and they are looking for xyz. The scammers use the information to set up their program to match xyz and leave out or address this or that. Just that slick!
There was a time that even stupid scammers could “win” big bucks setting up a HYI/Surf. Fortunately, as more and more HYI players become better informed, a lot of these scammers are being choked out of the pond.
Ok, on to the criteria, but first a disclaimer. The following list of criteria is not intended to be inclusive or to be solely used to determine if a program is a ponzi scheme. Why do I say that? It is because slick conmen are always evolving into new schemes and the criteria is always changing. Also, there is a chance that a real program meets a number of the criteria. A ponzi scheme may not meet all of the criteria. Any criteria that you use for choosing or bypassing a program should not be concrete; rather they should be a guideline. (Related articles: Things You Should Ask Before You Spend, Private programs, refunds and naive investors, and Accessing Risk when Investing in Surfs/HYIPs.)
Hype: The bigger the hype, the greater the chance that the program is a ponzi. Hype comes in many forms from over advertising to huge promises. Is the program advertised all over the place? Are there huge (usually big, colorful font) claims of great returns on the home page? Are people claiming that it is the “next big one?” Do they say “trust us” or “we are not a ponzi?” Then it may be a ponzi.
ROI: The bigger the ROI, the greater the chance that the program is a ponzi. Is the ROI unrealistic? Is the ROI greater than the revenue source normally returns? Is the ROI earned quicker than the source normally earns, i.e., earned in hours or days when normally it takes weeks or months to generate returns? Is it “too good to be true?” Does the ROI look like it was created out of thin air? Is the ROI fixed, rather than variable? Then it may be a ponzi.
Spends/Deposits: The smaller the minimum and the larger the maximum, the greater the chance that the program is a ponzi. Would a real business be bothered with members only depositing the minimum? Is the maximum greater than what can normally be used in the claimed revenue source? In addition, are they pressuring you spend fast or you’ll lose out? Then it may be a ponzi.
Withdrawals: The smaller the minimum withdraw amount and/or caps on the maximum, the greater the chance that the program is a ponzi. Is the minimum withdrawal so small that it would be nickel and diming the program to death? Is there a cap on the maximum withdraw? Then it may be a ponzi.
Timing: The faster the withdrawal is paid, the greater the chance that the program is a ponzi. Is the amount of time between requesting a withdraw and receiving payment shorter than the average time for moving funds out of a revenue source and into your payment processor/e-currency? Are withdrawals automatic, i.e., you don’t have to request a payout to your payment processor/e-currency? Then it may be a ponzi.
Transparency: The greater the number of secrets/lies, the greater the chance that the program is a ponzi. Does the program tell you what they do to generate returns? (Note: Knowing the revenue source is the most critical criteria, IMO.) Does the program lie about what they are using to generate returns? Does the program hide who and where they are located? Is the program running illegally according to the laws in their country? Does the program lie about registration, security, etc.? Is the “About Us” copied from other programs or have other obvious lies? Does the program lie about when they started and/or post fake news, statistics, etc.? Does the administrator/staff refuse to answer or skirt around the hard questions? Then it may be a ponzi.
Referrals: The higher the referral commission, especially multi-level referrals, the greater the chance that the program is a ponzi. (Note: Referral commissions are a good form of advertising, IMO.) Are the referral commissions higher than average for an advertising budget? Is the sum of multi-level referral commissions too high? Then it may be a ponzi.
Bonus/Contest: The more bonuses and contests, the greater the chance that the program is a ponzi. Is there a sign-up or deposit bonus? Are there contests to win money? Then it may be a ponzi.
Forum/Monitor Presence: The friendlier and/or cheerleading in the forums/monitors, the greater the chance that the program is a ponzi. Are there way too many cheerleaders? Is the forum administrator spending an inordinate amount of time being “friendly” in all of the forums? Did the program pay to be rated higher in the monitors? Are there obvious paid/good votes in the monitors? Then it may be a ponzi.
Gag Orders/Threats: Threats to delete your account for bad mouthing or bad votes, then the greater the chance that the program is a ponzi. Does the program include threats, other than spamming, fraud or cheating? Are controversial posts in the program’s forum deleted? Are you in danger of being deleted for asking a question? Then it may be a ponzi.
Past Programs/Multiple Programs: The higher the number of past and/or current programs, the greater the chance that the program is a ponzi. Has the program administration run a ponzi scheme in the past? Is the program administration running multiple like programs currently? Then it may be a ponzi.
TOS/FAQ Disclaimers and Claims: The more outrageous the claims/disclaimers and the lack of critical information, then the greater the chance that the program is a ponzi. Are there unusual claims or disclaimers hidden in the TOS or FAQ, e.g., a claim of being exempt from the US SEC, especially when the program isn’t even based in the US? Is the TOS or FAQ copied from other programs? Is critical information/policies missing? Then it may be a ponzi.
Program Changes/Excuses: The more the changes and excuses, especially as a program grows older, the greater the chance that the program is a ponzi. Are the terms, i.e., ROI, length of time to earn, lock-up period, fees, etc., changing frequently? Are the terms changing to deal with {fill in the blank}? Is the program constantly making excuses as to why they are delaying payments? Do they blame everything and everyone else for “problems?” Are they going private and reopening again? Does it feel like you’re in a revolving door? Then it may be a ponzi.
Refunds/Re-spends: If a program requires new money to get a refund or a payment, like the 50/50 rule, then the greater the chance that the program is a ponzi. Does the program require and/or ask for you to re-spend or compound in order for you to get paid? Does the program require you to spend into a new program in order to get a refund from an old, failed program? Does the program pay you a “refund” into a virtual account, instead of your payment processor/e-currency? Then it may be a ponzi. (Note: It is never wise to spend new money to get old money.)
New Members/New Money: If a program requires you to recruit and/or depends on new members/new money to survive, then it is a ponzi. Do you have to recruit new members in order to earn? Does the program’s communication talk about needing new members? Does the program concentrate on referrals or ask you to get referrals? Then it may be a ponzi.
Does the program say that it is a game or admits that it is a ponzi/partial ponzi? Then it is definitely a ponzi!
Remember that it is never your responsibility to prove that a program is a ponzi. It is the program’s responsibility to convince you that it isn’t a ponzi.
So what, why should I care if a program is a ponzi scheme, as long as I make money?
I will admit that the “so what” attitude was my own attitude for quite a while. I didn’t want to think about the reality. All I could think about was how to make money from these programs. How could I spot when to get in and out fast enough? After all, I was only “investing” what I could afford to lose!
Wake up, people! This is the exact attitude that the scammers are looking for. They want you to make a big spend and re-spends in the hopes of making it out with a profit before they close. They prey on those that are uninformed and only thinking about potential riches from the high ROI.
How many times have you created a spreadsheet about how much you could earn? How many times have you developed a deposit strategy? How many times have you lost more than you earned? How much are you down from the total amount that you pulled from your bank account? How many times have you hit and run programs only to lose in your total balance? How many times have you remained loyal to a program, only to lose in the end? Or are you a referral hound, leading others to become losers?
The bottom line is that you are not “winning” money from the program and/or the program administrator when you are in profit. You are taking money from other HYI players. For every person in the black, there are many more in the red. Do you ever read the sob stories people tell when they lose their “fortune?” If you do, do you think oh how sad that they invested more than they could afford to lose, or do you ever think that the money they lost is in your pocket and other people’s pockets now? While we are running around taking money from each other, administrators take their “cut” and laugh all the way to the bank as they start planning their next scam.
Ponzi schemes are illegal to protect people from the exact greed that drives us all to find “the next big one!” Let’s take a stand and boycott them so that they are the ones suffocating in server, script and advertising costs. Just maybe real programs will step forward and be known when the scammers become dust in the wind. Just maybe real opportunities will shine through the HYI pond.
Just say no to ponzi schemes!
JMO,
Sharon
One of the best from Sharon. One of the best
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I and many of my friends were “ponzied” by someone we thought was a really good friend. They happen all the time. The scammers are very good, sometimes building your trust for years. My Ponzi scammer ruined many, many lives.
I get what you mean, but if he’s a good friend, probably ask him why did he do that.
He might not know he’s breaking the law.
Are you serious? I’m no admin, I’m a player looking for a little extra money just like you, the author, and the above commentators.
Now I have to be real honest with you. What exactly the “real opportunities” that will appear in the high yield investment pond???
I mean seriously you actually believe that something legit and legal will come up and give you amazing returns that neither your bank or savings and loans could get in a million years.
I mean if for example the program is not a ponzi but still closes then is that okay? Let me be more specific. Lets say that I open a program and to fund the program I take out a 50 thousand line of credit. Sorta like a business person using his or her own funds to run the business, pay employees and so forth. Lets say my program becomes popular and people begin to notice I pay on time and without excuse. Eventually I begin to see that people are depositing more and more and compounding more and more (Their choice mind you) and eventually I have 85k in deposits including some of my own money from the line of credit. IF I close the program because I could no longer pay the interest rates then is that okay?
I mean no matter how you look at it EVERYONE is there to make money. The admin or owner doesn’t work for charity! You expect for something that promises extra ordinarey returns to not be shady in some way? I mean you can make money, sometimes you hit and miss. Thats all there is to it.
I just cannot comprehend how you would like a “clean” hyi pond…you actually want someone to figure out a way to get you hyi returns and all you have to do is just put money and and be promised that you’ll get it back and you just gotta sit back and wait for that money to roll in while you laugh at people with deposits in their local banks and those who invest in mutual funds.
You have to get real guy, seriously. You are biting the very hand that feeds you and you must be an a idealist that has yet to realize that the very thing you are fighting is the very thing you want to preserve.
If you don’t get that without an explanation then I really feel sorry for you.
No harsh feelings guy but you really don’t make any sense.
All programs that are hyips or autosurfs or cyclers are ponzi is some way or perhaps made with my above scenerio but eventually it is insustainable and they close and heres what happens:
1. The admin made his money as well as other people who were lucky enough to get out while they had the chance. He also made his cut for providing entertainment and the ability to make a few people some extraordinarey returns
2. The people who made money are happy because they now made what would take years at their local bank
3. The people that lost and should have no regrets since they played with money they could afford to lose.
There are of course people who have absolutely no idea that they were done up the ass and had their money stolen but come on…if they are smart enough to go online and find hyips they should have known something was fishy. If they do get burned the best thing to do is to forget it and move on and never ever again try to make your money back by continuing to play.
My suggestion to you is to try to start your own program with your ideals and then tell me how easy it is to please peoples expectations as well as your own.
Be prepared to be surprised