What is a Ponzi Scheme? - Top 5 biggest Ponzi Schemes in crypto world

Ponzi Scheme definition
Ponzi Scheme is a from of scam which takes money from new investors to pay older investors. People taking part in Ponzi Scheme are lured to believe that their returns are from ligitimate sources and are encouraged to attract new investors through referral bonuses. In fact, Ponzi Scheme collapses when there’s no more newcomer.

Origin of Ponzi Scheme
The scheme was named after Charles Ponzi in 1919. At that time, the postal service developed something called “international mail coupon”, allowing mail receivers to buy priority airmail postage stamps needed to send replies. Realizing the fluctuation of stamps price, Ponzi planned to make money by buying stamps at low prices (with mail coupons) and then sell them at higher prices (this also known as a type of arbitraging).

The story didn’t end there. Greediness made Ponzi expanded his business. He sought investors and promised them a return of 50% in just 45 days. But instead of focusing on stamp arbitraging, Ponzi paid old investors by new investors’ money. Ponzi was so success that he made $ 420,000 (approx $5.13 mil in 2017 money) by May 1920. Charles Ponzi was arrested on August 12, 1920 and sentenced 14 years in jail.

Ponzi Scheme Red flags
The most prominent sign of Ponzi Scheme is high investment returns with low risk. Of course, everybody may have heard of “high risk, high return” but people are usually blinded by their greediness, especially lesser educated people. 1% per day, 50% in 45 days or any returns that distant from bank interest rate are suspicious. Other indicators are:
-   Consistent returns regardless of market situations
-   Lack of transparancy: no name, no contact nor office addresss
-   Difficulty withdrawing investment

How to avoid Ponzi
It’s very difficult to cash out once you’re involved in Ponzi Scheme. So the only way to avoid Ponzi is to stay away from it and report to authority. Keep your head cool before fancy words of other people, something like risk-free, high return…

Top 5 most famous Ponzi Schemes in crypto world
1.   Bitconnect: Initially being released on early 2016, bitconnect had a long journey in crypto world before being accused by the US government in early 2018.
2.   Pincoin & iFan: Lesser educated people are the easiest to fall for scams. This is an ordinary example.
3.   OneCoin: Rather than Pincoin & iFan, OnceCoin is a multinational scam, involving in India, Thailand, Croatia, Bulgaria, Norway and Finland.
4.   Regalcoin: Combining MLM and Ponzi, Regalcoin used to be very famous in South East Asia before collapse following other Ponzi coins such as Bitconnect.
5.   Hextracoin: Following Regalcoin’s footstep, Hextracoin had a short time of success in late 2017. This Ponzi Scheme made some people rich but also made a lot of people homeless.