Ponzi scheme (crypto)

A Ponzi scheme pays existing investors with money from new investors rather than from real profits. It needs a constant flow of new money and collapses when recruitment slows or too many people try to withdraw. The name comes from Charles Ponzi, who ran such a scheme in the US in the 1920s.

Crypto has been a fertile ground for Ponzi and pyramid schemes because many people do not understand the technology. Common signs include guaranteed daily or monthly returns, vague claims about trading bots, arbitrage or mining, rewards for recruiting others, pressure to reinvest, and difficulties withdrawing. Well-known examples include BitConnect, which collapsed in January 2018, and OneCoin, which turned out to have no real blockchain at all.

A genuine crypto investment cannot promise fixed returns, because prices are volatile. If a scheme pays more for bringing in friends than for any underlying activity, treat it as a scam, however professional the website or events appear.