How Ponzi Schemes Are Using Cryptocurrencies to Dupe Investors

A Ponzi scheme can be classified as a kind of fraudulent investment scheme wherein investors are promised an exceptionally large return on their investment. The organizers promise a high return and that too, without any significant risk attached to the investment. As one can easily make out, the promise of high return without a considerable risk is not a feasible proposition in the investment world, but still many people fall in the lure of getting higher returns in the shortest possible time and become the victim of such fraudulent schemes.

How Ponzi Schemes Work?

The modus operandi of Ponzi schemes is not a very complex one. Usually, scammers collect money from new investors and pay the amount to old investors and in the process, they keep a share of the investment with them. This vicious cycle keeps going as long as possible before finally collapsing in the absence of any solid investment idea or source of income.

There are a number of characteristics from which you can easily find whether a particular scheme falls into the category of the Ponzi scheme or not. For example, if somebody offers very high returns on some investment plan without giving you details of risk and return factor, you have all the reasons to be concerned about it. Further, these kinds of fraudulent investment schemes are not registered with any regulatory authority and hence, there is no legal measure that one can take after being duped by the fraudsters.

Virtual Cryptocurrencies and Ponzi Schemes

The rising popularity of virtual currencies among the fraudsters has raised a red flag for many regulators across the world. The organizers of Ponzi schemes are increasingly using digital coins to lure investors in return for high rewards. The primary reason for fraudsters switching to cryptocurrencies is the decentralized and unregulated nature of digital coins, which makes it easy for cheaters to remain untraced even after committing fraud.

Take, for instance, the example of the PlusToken Ponzi scheme, which has recently moved Bitcoin worth of $117 million to a new address. Just so you know, PlusToken is based in China and has duped investors of cryptocurrency worth billions. In fact, according to a research estimate, investors lost $4 billion worth of investment in 2019 to the various cryptocurrency scams with Ponzi schemes emerging as the major accomplice in these frauds.


The decentralized nature of cryptocurrencies has proved to be a blessing for a number of industries, including the financial technology domain, overseas payment, etc. Digital coins have made payment free of any third-party interference, which, in turn, helps processes to become streamline and more cost-effective. However, the high level of privacy offered by cryptocurrencies has also attracted scammers who are attaching their Ponzi schemes with virtual coins to dupe investors. Regulatory agencies and legal authorities are also not very effective in case of stopping these Ponzi schemes as fraudsters use virtual currencies to run their operations and remain untraced even after committing fraud.

In order to steer clear of Ponzi schemes, you must strive to become an aware and educated investor. Do not invest in a scheme that promises you an exceptionally high rate of return or claims to double or triple your money in just 15 days or a month. As an informed investor, it is your responsibility to check the credentials of the investment agency and find out whether it has been registered with any regulatory body or security exchange. If you take all these precautions, we are sure that your investment will remain safe and secure in the long run.

Trevor Holman

Trevor Holman follows crypto industry since 2011. He joined CryptoNewsZ as a news writer and he provides technical analysis pieces and current market data. He is also an avid trader. In his free time, he loves to explore unexplored places.

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