Do you know how to spot a Ponzi or pyramid scheme? Many other people thought they were sure that the scheme they were investing in was not one of these illegal ways of fleecing consumers of their hard-earned money, just to end up destitute, with not a cent to their name.
Just think of BHI Trust and Mirror Trading International and how it destroyed people’s lives when the schemes folded. Consumers have to be very careful when they invest their money to ensure that their funds are safe.
Roshan Jelal, head of fraud risk management at FNB Commercial, says the key to helping investors protect themselves better from falling victim to investment fraud is to stay alert and be aware of the key characteristics and red flags associated with Ponzi and pyramid schemes.
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What is a Ponzi scheme?
“Ponzi schemes have existed for over 100 years and range in shape, complexity and size. Investors are often promised extraordinarily high returns within a short period of time, with little or no risk.
“However, the money ‘invested’ from new investors is either used to pay returns promised to earlier investors or returns are paid from the initial investment, creating an illusion of a very lucrative business.”
Jelal says in the absence of any legitimate underlying business, this unsustainable scheme eventually collapses as it becomes impossible to attract new investors…
